Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Activity Budgeted Activity Cost Activity Base Casting $640,000 Machine hours Assembly 189,000 Direct labor hours Inspecting 44,100 Number of inspections Setup 50,050 Number of setups Materials handling 44,000 Number of loads Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow: Activity Base Entry Dining Total Machine hours 6,320 13,680 20,000 Direct labor hours 6,300 4,200 10,500 Number of inspections 440 610 1,050 Number of setups 330 220 550 Number of loads 220 780 1,000 Units produced 2,600 4,900 7,500 This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below. Fill in the blanks below: Determine the activity rate for each activity. If required, round the rate to the nearest dollar. Activity Activity Rate Casting per machine hour Assembly per direct labor hour Inspecting per inspection Setup per setup Materials handling per load Use the activity rates in (a) to determine the total and per-unit activity costs associated with each product. Round the per unit rates to the nearest cent. Product Total Activity Cost Activity Cost Per Unit Entry Lighting Fixtures Dining Room Lighting Fixtures
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows:
Activity |
Budgeted Activity Cost |
Activity Base |
|
| Casting | $640,000 | Machine hours | |
| Assembly | 189,000 | Direct labor hours | |
| Inspecting | 44,100 | Number of inspections | |
| Setup | 50,050 | Number of setups | |
| Materials handling | 44,000 | Number of loads |
Corporate records were obtained to estimate the amount of activity to be used by the two products. The estimated activity-base usage quantities and units produced follow:
| Activity Base | Entry | Dining | Total | |||
| Machine hours | 6,320 | 13,680 | 20,000 | |||
| Direct labor hours | 6,300 | 4,200 | 10,500 | |||
| Number of inspections | 440 | 610 | 1,050 | |||
| Number of setups | 330 | 220 | 550 | |||
| Number of loads | 220 | 780 | 1,000 | |||
| Units produced | 2,600 | 4,900 | 7,500 |
This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.
Fill in the blanks below:
-
Determine the activity rate for each activity. If required, round the rate to the nearest dollar.
Activity Activity Rate Casting per machine hour Assembly per direct labor hour Inspecting per inspection Setup per setup Materials handling per load -
Use the activity rates in (a) to determine the total and per-unit activity costs associated with each product. Round the per unit rates to the nearest cent.
Product Total Activity Cost Activity Cost Per Unit Entry Lighting Fixtures Dining Room Lighting Fixtures
ACTIVITY BASED COSTING
Activity Based Costing is a Powerful tool for measuring performance.
Activity-Based Costing (ABC) is used to identify, describe, assign costs to, and report on agency operations.
ABC systems calculate the costs of individual activities and assign costs to cost objects such as products and services on the basis of the activities undertaken to produce each product or services.
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